Key points
- Tax residency is decided by the Australian Taxation Office (ATO) and is separate from your visa or migration status.
- You can be a tax resident without being an Australian citizen or permanent resident.
- International students in courses longer than six months, and people who settle in one place in Australia, are usually tax residents.
- Working holiday makers (subclass 417 and 462) are taxed at 15% on their first $45,000 and do not get the tax-free threshold.
- The ATO uses four tests: resides, domicile, 183-day and Commonwealth superannuation.
Visa holders would need to work out their tax situation while in Australia. This is particularly true for those who are working in Australia. To understand your tax situation, you would need to find out if you are an Australian or foreign resident for tax purposes.
Residency test
The meaning of resident for taxation purpose is different from that of the Department of Home Affairs (DoHA). That is, you can be an Australian resident for tax purposes without being an Australian citizen or permanent resident.
The Australian Taxation Office (ATO) uses the ‘reside test’. Essentially, to determine if someone is a resident or not, the ATO will look into the following factors:
- Intention or purpose of presence
- Family and business or employment ties
- Maintenance and location of assets
- Social and living arrangements
ATO has a calculator which can help you determine if you are a resident for tax purpose. You can find the calculator here.
Some common scenarios where a visa holder is considered to be an Australian resident for tax purposes:
- International students enrolled in a course that is more than six months long.
- Working and living in the one location and have taken steps to make Australia your home.
- Migrate to Australia and intend to live in Australia permanently.
Usually, you are considered to be a foreign resident if you are:
- Visiting Australia for less than 6 months
- Visiting Australia and you are travelling and working in various locations around Australia
Working Holiday Makers
Working Holiday Makers on subclass 417 Working Holiday Visa or Subclass 462 Work and Holiday Visa are considered to be foreign residents for tax purposes. Therefore, working holiday makers will be taxed at 15% on the first $45,000 of income (this threshold applies from 1 July 2024), while residents get their first $18,200 tax-free. Working holiday makers also do not get the tax-free threshold.
Are you a resident for tax purposes?
| If you: | You are generally: |
|---|---|
| leave Australia temporarily and do not set up a permanent home in another country | an Australian resident for tax purposes |
| are an overseas student enrolled in a course that is more than six months long at an Australian institution | an Australian resident for tax purposes |
| are visiting Australia, working and living in the one location and have taken steps to make Australia your home | an Australian resident for tax purposes |
| are visiting Australia and for most of that time you are travelling and working in various locations around Australia | a foreign resident for tax purposes |
| are either holidaying in Australia or visiting for less than six months | a foreign resident for tax purposes |
| migrate to Australia and intend to reside here permanently | an Australian resident for tax purposes |
| leave Australia permanently | treated as a foreign resident for tax purposes from the date of your departure |
Related: Buying a Property in Australia – Temporary Residents
The four residency tests
The ATO applies up to four tests. If you meet the first one (the resides test), you are a resident and the other tests do not need to be considered. Select a tab to read about each test.
The primary test of tax residency is called the ‘resides test‘. If you reside in Australia, you are considered an Australian resident for tax purposes and you don’t need to apply any of the other residency tests.
Some of the factors that can be used to determine residency status include:
- physical presence
- intention and purpose
- family
- business or employment ties
- maintenance and location of assets
- social and living arrangements.
If you don’t satisfy the ‘resides test’, you’ll still be considered an Australian resident if you satisfy one of three statutory tests.
Disclaimer: No Tax Advice or Legal Advice
The Content does not constitute tax and/or legal advice and should not be relied upon as such. You should seek tax, legal or other professional advice before acting or relying on any Content.
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